Obama’s worst nightmare: The slow economy slows some more

By Jennifer Rubin

The Wall Street Journal headline reads, “May Data Indicate Slowdown.” Many Americans didn’t know things had previously picked up. The economic picture is, in any event, far from rosy:
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The U.S. manufacturing sector slowed sharply in May, according to data released Wednesday by the Institute for Supply Management. Price pressures lessened.
Separately, private businesses barely added jobs in May as large companies cut workers, according to a report released Wednesday. The news is sure to raise further fears about the second-quarter U.S. economy.
The ISM’s manufacturing purchasing managers’ index fell to 53.5 in May from 60.4 in April. Readings above 50 indicate expanding activity.

The job picture is alarming as well. “Private-sector jobs in the U.S. rose by just 38,000 last month. . . . Economists surveyed by Dow Jones Newswires had expected [payroll giant Automatic Data Processing Inc.] to report a much larger job gain of 190,000 last month. The April data were revised to show a rise of 177,000 versus 179,000 first reported.”
All of that comes on top of gloomy data from the housing market . The Jourrnal reports:

Home prices have sunk to 2002 levels, effectively wiping out almost a decade’s worth of home equity across the U.S. and imperiling the fragile economic recovery as Americans confront the falling value of their biggest investment.
A closely watched home-price index released Tuesday, the S&P/Case-Shiller National Index, showed that prices nationwide fell 4.2% in the first quarter after declining 3.6% in the fourth quarter of 2010. The index had seen increases in 2009 and early 2010. . . . That doesn’t bode well for the economy, which historically has depended on home buying and other consumer spending to rebound. Falling prices hurt economic growth in a number of ways. Not only do homebuyers curb spending when their homes are losing value, but continued price erosion keeps families stuck in homes they can’t sell because they are worth less than what they owe.

So what is wrong with the housing market? Economist Douglas Holtz-Eakin, the president or the American Action Forum, e-mails me, “The economy is weak and this translates into weakness in housing demand. The underlying absence of confidence is especially vivid in housing. Policies have been a problem, not an assistance.” He points to the anemic efforts to help consumers and borrowers. “First time homebuyer credits, HOPE, HAMP, etc. have all been too small to be economically significant and have set back the basic clearing of the market.” And then the Obama administration has made things harder for potential buyers to get loans. “Dodd-Frank and scrutiny of community banks has made qualifying for mortgages difficult.”
None of this is good news for investors, employers or the public at large. And it is simply awful news for the president’s reelection prospects. No matter how unexciting the Republican field is at the moment, conservatives find hope for 2012 in the theory that reelection campaigns are referenda on the incumbent president. If they want to rehire him, they stop there. If, however, they conclude he has not delivered, they will be open to an acceptable alternative. Think 1980 or 1992.
This in essence is the argument that the current GOP contenders have going for them: They needn’t be superstars, just good enough. That might not be the most thrilling bumper sticker ( “TPaw — Good Enough” or “Romney — At Least not Obama”), but it is a problem for the Obama camp. The president can’t merely attack his opponent or George W. Bush as he did last time; he’s going to need a record of accomplishment on the issues voters care most about. And unless the economy turns around very quickly, that’s going to be a very large problem.